Maine paper mills should prepare to fight back

Michael C. York | AP

Michael C. York | AP

The paper mill in Bucksport, Maine, in 2000.

September 5, 2012 4:29 pmUpdated: September 19, 2012 12:03 pm

It’s a good idea for the owners of Maine paper mills to prepare themselves for the potential reopening of a mill in Port Hawkesbury, Nova Scotia. The Cape Breton mill has not yet received the anticipated government subsidies to open, but, if it does, Maine mills should know whether appealing to national trade decision-makers is a worthwhile response.

It can be an extensive, expensive process for paper manufacturers to file a petition with the U.S. International Trade Commission against subsidized imports, so it would be best for them to start gathering information now about their chances of convincing the ITC and the U.S. Department of Commerce to assess tariffs on the subsidized Canadian paper.

Until last year, the Nova Scotia mill was producing paper for glossy magazines and catalogs. But its owner, NewPage Corp., shuttered the facility because it was unprofitable. Now, a new buyer, Pacific West Commercial Corp., wants to reopen the mill with the provincial government’s help. The government has put together a package of incentives totaling $125 million, plus an agreement to provide cheap electricity. The final hurdle: The Canada Revenue Agency needs to approve a tax break request relating to the deal.

Having more paper in the North American market — produced cheaply because of the subsidies — could lower its price. That means it could be more difficult for mills making the same type of paper in Maine to compete. Those mills include UPM-Kymmene Corp.’s mill in Madison and Verso Paper Corp.’s mills in Jay and Bucksport.

The Nova Scotia mill has the capacity to produce 360,000 tons annually, representing at least 18 percent of the supercalendered paper market in North America. It’s not likely that a Maine mill would abruptly close because of the reopening, but it’s more difficult to assess the long-term impact. It’s possible an individual paper machine could be shut down or production could be cut back, which could affect a mill’s larger price structure. At the very least, the Nova Scotia mill reopening would make it harder for Maine papermakers to do business.

The matter is also one of fairness. It’s difficult to see any mill worker lose his or her job, but if the provincial government is going to provide substantial assistance to its mill, it should not be surprised by the response of mills elsewhere to preserve their value. Premier Darrell Dexter said in news reports that the mill would represent 2.5 percent of the province’s gross domestic product, support 1,400 jobs and provide annual tax revenues of $11 million to $13 million.

But no matter the potential benefits to Nova Scotia, Maine mills — which employ roughly 7,400 people — should object if they are competing against a company with an unfair advantage. And they have historically done so. Sappi Fine Paper and NewPage were two petitioners to win relief when the international trade commission voted in 2010 to impose duties on paper imports from China and Indonesia. The countries had illegally subsidized their paper industries and dumped their product on the markets to depress prices and increase their market share.

To get relief, owners of the Maine mills have to know the legal process, work with Maine’s congressional delegation and have evidence of low paper prices negatively affecting the market. They should prepare as much as they can now to protect the industries and jobs they have worked so hard to maintain.